No Question, Ryan Will Be Put To The Test Retooling Aon

The question came over the phone line, and it lay there for a moment unanswered, as unwelcome as the corpse just after a murder.

Aon Corp. Chairman Pat Ryan had received it. And though Ryan wasn't visible during the teleconference call Thursday, you could almost hear him blanch over the phone line.

The analyst's question was this: Should Ryan step down as chairman and chief executive of Aon Corp.?

Ryan had just announced $325 million in restructuring charges and the layoff of 3,000 employees at the nation's second-largest insurance brokerage. He had shocked Wall Street analysts with his second major earnings shortfall this year. And during an excruciating 90-minute analyst call, he refused repeatedly to estimate Aon's likely results for 2001.

"I think I'm doing an excellent job moving this company forward," Ryan said. "We've come a long way from four years ago."

Still, the question was asked. It was answered. This alone shows the gravity of Aon's--and Ryan's--troubles.

Not that there's any chance of Ryan leaving any time soon. Nor should he. Not yet, anyway. He has earned at least one good shot at making Aon work.

Ryan, who is a director of Tribune Co. and a fixture in Chicago's civic scene, built his company from a one-agent car insurance firm a quarter century ago to a $21 billion colossus.

His global growth-through-acquisition strategy has helped Aon stock soar through the years and made him a respected legend. His 12 percent ownership stake in Aon means Ryan is hurt more than anyone by the company's recent poor results.

This is not an Arthur Martinez, who tried to fix Sears, Roebuck and Co. and couldn't quite finish the job. This is not Bank One's John McCoy, who voraciously gobbled midlevel banks but couldn't digest the results.

Ryan knows a restructuring is long overdue. Thursday, he laid out the broad outlines of his plan. Details will come later, after Ryan & Co. figure them out.

He'll lop heads. That's an admission of CEO error, not a plan for redemption, but it is an improvement at cost-heavy Aon.

He'll aggressively integrate technology. Another late move, but the rest of the industry is so weak Ryan still has a shot at being a leader.

Ryan also will push what he calls "organic growth."

This is an area where Ryan hurt himself, and his stock price, last week. A gunslinger at the negotiating table, Ryan is conservative to a fault in communicating with the public.

He refused to estimates figures for 2001, he said, mainly because he doesn't know how big a distraction the restructuring will be. "There is the issue of (people) standing around the water cooler talking, so we don't want to say" what the impact may be, he told analysts Friday.

Simple solution: Remove the water coolers, then get some earnings estimates.

In his public dealings with Wall Street Thursday and Friday, Ryan sounded like a brave old bear surrounded by hunting dogs. Backed up against the boulder of his strong command of Aon's facts, he swatted away criticism with his reasonable-sounding restructuring plan.

But there was no defending his unwillingness to forecast next year's numbers. Ryan understandably didn't want to give out a bad estimate, but this left analysts feeling he does not yet know the depths of his problem.

It was a case of panned if you do and panned if you don't. And Ryan and Aon both got panned.

Analysts raced to put out the bad news. Several downgraded Aon's stock. And Aon shares traded down 26 percent for the two days.

This puts Ryan, 63, in his most uncertain position in years.

From now on, he will have to focus internally. In overhauling Aon's technology, Ryan will have to persuade customers and clients to change, too, just as Wal-Mart and Home Depot have forced revolutionary changes from their partners by setting tough new standards.

And Ryan must force a new corps of top executives to embrace radical change.

Pat Ryan the dealmaker must become Pat Ryan the turnaround artist. And if he can't do that, Ryan better get used to questions about his retirement plans.